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Investing in Angola: Between Extremes

19 September 2012

Mayer Brown Article

Angola is a land of extremes. While many Angolans live in deepest poverty, the Angolan economy is the third largest in Sub-Saharan Africa, with annual GDP growth regularly topping 10 percent over recent years. In a country which spent nearly 30 years in a state of civil war, peace has now firmly taken hold. While Angola ranks 172nd out of 183 for ease of doing business (IFC “Doing Business” Report 2012), record foreign investment is flowing into the country.

At the heart of the story is Angola’s wealth of natural resources. Angola is the second largest oil producer in Sub-Saharan Africa, and it holds substantial and varied mineral reserves, including diamonds, iron ore, phosphates and gold. Its agricultural and fishing potential are also considerable. Public and private investment are at record levels with no signs of abatement. Much of the investment is being directed toward infrastructure development, which, with housing, is an urgent priority following the devastation of the decades of civil war.

Foreign construction companies wishing to do business in Angola must meet a series of legal and economic requirements. Angola’s position in the “ease of doing business” rankings warns us that clearing these hurdles will not be easy and can be time-consuming and bureaucratic. However, the significant business opportunities may well justify the time and effort involved.

Private Investment Framework

In 2011, Angola passed a Private Investment Law requiring foreign investors that wish to establish a company or branch office in Angola to have their venture approved as a “Private Investment Project” by the Angolan Private Investment Agency (Agencia Nacional de Investimento Privado or ANIP). To qualify under the Private Investment Law, ventures must comply with the following legal and financial requirements:

The company or branch registered in Angola must agree to an invest¬ment contract with ANIP. This confers a right to repatriate profits (subject to the control of the BNA, the Angolan central bank).

An investor cannot simply repatriate profits as it wishes. Repatriation is instead governed by conditions negotiated with ANIP on a case-by-case basis and incorporated into the investment contract.

The extent of repatriation permitted (and its timing) depends on a number of factors, including the amount and duration of the investment, the profits made and the impact of repatriation on national reserves. For example, a foreign entity investing US$1 million in a project in the Luanda area would currently only be allowed to repatriate profits two years after full implementation of the project.

Once the investment is approved, ANIP issues a Private Investment Registry Certificate (Certificado de Registo de Investimento Privado or CRIP), which is required before the investor can take further steps such as importing capital, establishing a local company/branch office or pursuing the necessary permits and licenses.

Permits and Licenses

Construction work in Angola is governed by the Ministry of Urbanism and Construction. If a company wishes to become directly involved in construction works, a General Construction Permit from the ministry is a prerequisite. There are a number of categories, subcategories and classes of the General Construction Permit (as per Decree No. 09/1991). The particular (sub)category determines the type of construction activities the holder may engage in, and the particular class relates to the value of the construction works; the higher the class of permit, the greater the value of the construction works permitted.

The performance of private construction work in Angola also requires a license (an authorization for construction, known as an “Alvará”) issued by the governor of the province where the work is to be undertaken. An application must be made to the relevant provincial government in accordance with Decree No. 80/2006.

And the Reward?

Although the regulatory requirements governing investing and doing business in Angola are numerous and complex, and compliance in most cases is likely to be laborious, they do not appear to be deterring foreign investment in Angola: UK investment currently exceeds US$3 billion per annum, which is second only to China’s investment. A bilateral investment treaty between the UK and Angola has already been signed. If and when it is brought into force, it will likely provide further security to UK investors and spur further investment.

In any event, with careful consideration and advice, and a measure of patience and persistence, meeting the regulatory requirements is certainly achievable. The reward is gaining access to one of the fastest-growing markets in Africa.

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the “Mayer Brown Practices”). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe-Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown Mexico, S.C., a sociedad civil formed under the laws of the State of Durango, Mexico; Mayer Brown JSM, a Hong Kong partnership and its associated legal practices in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. Mayer Brown Consulting (Singapore) Pte. Ltd and its subsidiary, which are affiliated with Mayer Brown, provide customs and trade advisory and consultancy services, not legal services.

“Mayer Brown” and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

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